egg plc q1 financial results and new business figures/media/files/p/prudential-v3/results... · q1...

Egg plc

Egg plc

Q1 Financial Results and New Business Figures

“Our UK business has delivered strong growth in both customers and profits during the quarter. In France, our first product, la Carte Egg, which we recently launched has taken off more slowly than we had hoped for but having achieved high levels of brand awareness we remain confident about Egg France’s long term prospects.” Paul Gratton, CEO, Egg plc Highlights: Analysis of Group Profit and Loss Account

Q1 2003 Q1 2002

£m £m

Egg UK 17.3 £m

Egg France (23.9) (0.5)

Other International (2.3) (1.3)

Subsidiaries/Associates/JV’s (1.6) (0.8)

Restructuring (5.2) -

Group (Loss)/Profit before Tax (15.7) 2.4

Egg plc

Group

�� Group operating income up 29% to £95.2 million (Q1 2002: £73.7 million)

�� Group loss before tax of £15.7 million (Q1 2002: £2.4 million profit)

�� Group loss per share 2.2p (Q1 2002: earnings per share of 0.2p)

�� Total group assets of £10.5 billion (Q1 2002: £8.8 billion)

UK

�� Egg UK delivered a profit before tax of £17.3 million (Q1 2002: £5.0 million)

�� 165,000 net new customers acquired in the first quarter (Q1 2002: 157,000)

�� Unsecured lending balances grew by £200 million (Q1 2002: £160 million) leading to

quarter end balances of £3.5 billion (31 March 2002: £2.5 billion)

�� Strong sales growth in personal loans with drawdowns of £213 million, up 85% on

Q1 2002 (£116 million).

�� Credit quality remains strong and benchmarks continue to show Egg’s card portfolio

significantly outperforming industry norms.

France

�� Brand awareness (55%) and consideration (23%) are highly encouraging

�� We expect 45,000 of our accepted applications since launch to convert to full

customers (27,000 had completed the activation process by period end).

�� Total French customer base now approximately 108,000.

�� Loss before tax of £23.9 million (€35.3 million) for Q1 reduced from £27.3 million

(€42.3 million) in Q4 2002.

�� Based on experience to date we expect to increase the profit and loss account

investment in France over the next three years by €140 million compared to original

estimates. We believe the new plan, with a total investment of approximately €300

million, delivers an attractive French business of equal value to that anticipated prior

to launch.

Other

�� Q1 2003 saw £2.3 million spent on research into potential international market entry

strategies.

�� Restructuring costs of £5.2 million were incurred in Q1.

Egg plc

Chief Executive Paul Gratton said:

“The UK business has delivered strong growth having successfully increased both

customer numbers and profits in an increasingly competitive marketplace and in a

market where we have seen some weakening in consumer confidence.

“Personal loan sales were strong again in Q1 with disbursements of £213 million, up

85% on the same period last year. Revenues exceeded £95 million for the quarter on

the back of improving margins and healthy levels of other operating income. In addition

we continue to actively manage costs and we have seen no deterioration in the credit

quality of our retail asset portfolio which remains industry leading for credit cards.

“France remains an attractive market for Egg, with 9 million consumers within our target

customer base. High brand awareness and consideration are both encouraging, giving

us a platform on which to build. We remain very pleased with the quality of customers

we have attracted to date. Early usage of the card is higher than anticipated and the

percentage of customers borrowing is increasing in line with our plans. We have

successfully migrated our card proposition from the launch focus on cashback to a clear

and attractive credit offer to our customers.

“That said the business has started more slowly than we had anticipated and based on

experience to date, we are adjusting our targets for Egg France which we set at the

beginning of 2002. We intend to increase the profit and loss account investment over

the next three years by approximately €140 million and now expect breakeven to be

delivered in 2005. We are concentrating on building value through a deeper relationship

with customers.

“As indicated in February we have been conducting research during the first quarter in

the USA. Early findings suggest that there would appear to be attractive opportunities in

the USA for an Egg branded proposition, however in the short term we do not intend to

progress market entry plans. We are committed to delivering long-term value to

shareholders through building an international business of scale and leading the industry

for innovation in financial services to the ultimate benefit of our customers.”

Egg plc

Overview of Group Results

Summary profit and loss account by quarter (Unaudited)

Q1 2003 Q4 2002 Q3 2002 Q2 2002 Q1 2002 £m £m £m £m £m

Net Interest Income 64.3 58.0 53.8 56.2 55.3Other Operating Income 30.6 30.9 25.8 24.5 18.4

Egg UK Operating Income 94.9 88.9 79.6 80.7 73.7Operational and Administrative

Expenses (32.9) (36.8) (33.3) (31.7) (31.7)

Brand and Marketing Costs (9.0) (7.9) (6.0) (12.9) (7.8)Development Costs (4.9) (3.3) (4.2) (4.2) (5.7)Depreciation and Amortisation (4.0) (4.2) (4.7) (4.7) (4.9)Provisions for Bad and Doubtful

Debts (26.9) (23.7) (21.2) (20.6) (18.6)

Egg UK Operating Profit 17.3 13.0 10.2 6.6 5.0Egg France (23.9) (27.3) (13.9) (5.0) (0.5)Other International (2.3) (0.7) (0.6) (0.8) (1.3)Subsids/Associates/JV’s (1.6) 2.3 (0.8) (2.0) (0.8)Restructuring Costs (5.2) - - - -

Group (Loss)/Profit before tax (15.7) (12.7) (5.1) (1.2) 2.4

Egg plc

Egg UK

Revenues

Net interest income grew strongly in Q1 2003 to £64.3 million mainly reflecting an

improvement in deposit margins as the final eligible customers rolled off the bonus

account incentive pricing.

Other operating income (£30.6 million) remained strong up 66% on the same period last

year. Commission from selling creditor insurances and fees from our growing card book

remain the main contributors to this figure.

Costs

Operational and administrative costs remain tightly managed and we are achieving lower

unit operating costs. In addition, savings were achieved in overheads following the

restructuring programme.

Brand and marketing costs were £9.0 million in Q1 2003 and contributed to Egg

delivering a stronger sales performance than last quarter with 165,000 customers

acquired (Q4 2002: 141,000).

UK development costs increased to £4.9 million for the quarter, the highest spend since

Q1 last year. This reflects a number of new initiatives including the build of a new

customer data warehouse that will further improve both Egg’s marketing campaign

activity as well as further deepening our credit analytics capabilities.

Depreciation at £4.0 million in Q1 2003 continued the downward trend started towards

the end of last year.

Egg plc

Bad Debt Provisions

Credit quality remains strong and provision levels reflect growth in the portfolio and the

stage in life cycle of unsecured lending. There has been no deterioration in the

underlying performance of the book. This results in a quarterly charge for Q1 2003 of

£26.9 million (Q4 2002: £23.7 million).

Egg France

The loss in France for Q1 was £23.9 million (€35.3 million). This was in line with our

revised plans for the French business. The bulk of the loss results from operational and

administrative expenses (£9.6 million) and brand and marketing (£9.7 million). The

operational costs are relatively fixed in nature at present but have the capacity to absorb

significant growth. We will continue to invest in brand and marketing as we develop our

business in France.

Subsids/Associates/JV’s

The £1.6 million net loss in Q1 2003 includes £0.9 million for Funds Direct which is

mainly in relation to development costs for the integrated business to business platform

currently being built. In addition goodwill amortisation accounts for a further £0.4m with

Egg’s share of Marlborough Stirling Mortgage Services Limited and IfOnline Group

Limited losses being £0.3 million.

Restructuring Costs

The £5.2 million charge is made up of two different components. The largest element

(£3.1 million) reflects a recent reorganisation within Egg’s IT development function.

Following the conclusion of the build of Egg France launch systems, a review was

undertaken as to the best way to resource and run the IT development team. This

resulted in a decision to locate the team in one place rather than across two sites and

also to reduce the level of fixed costs within the function to allow more flexibility in how

Egg manages its development pipeline.

Egg plc

In addition, we have effected a restructure within the UK and French overhead areas at

a cost of £2.1 million. We expect this to deliver equivalent cost savings within a year.

Other International

These costs (£2.3 million) predominantly represent the investment in consumer,

technology and proposition research conducted in the USA during Q1. The initial

findings show that there is an opportunity for an Egg branded proposition to be

successful in the USA but in the short term we do not intend to progress market entry

plans. We intend to restrict spending on research and development on international

opportunities and capabilities to £3.5 million in total in 2003.

Egg plc

Business Performance

Egg UK

Summary New Business Figures by Quarter

Q1

2003Q4

2002

Q3

2002 Q2

2002Q1

2002

Net New Egg Customers (‘000) 165 141 107 205 157 Net New Customers by product (‘000) - Deposits 10 10 45 57 2 - Credit Card 181 130 75 182 157 - Personal loans 13 15 16 8 5 - Mortgages - 1 1 2 1 - Egg Invest 1 - 1 5 13 - Egg Insure 27 23 18 12 9 Products £m £m

£m £m £m

- Egg Card Balance Growth 71 83 126 207 145 - Egg Personal Loan Drawdowns 213 294 269 150 116 - Egg Mortgage Drawdowns 83 124 132 118 110 - Egg Deposit Flows (net) (334) (221) 671 1,947 (345)

Egg plc

Cumulative Figures

31 Mar

200331 Mar

2002 31 Dec

2002

Total Egg Customers (1) (2) 2,725,915 2,107,872 2,561,167 Customers by product (1) - Credit Card (4) 2,093,229 1,525,526 1,912,526 - Savings (3) 750,658 627,555 740,506 - Personal loans (3) 160,745 107,438 147,453 - Mortgages (3) 30,444 26,346 29,947 - Egg Invest (3) 56,465 49,897 55,909 - Egg Insure (3) 112,633 32,951 85,468 Product balances (1) £m

£m £m

- Egg Card 2,401 1,914 2,330 - Egg Savings 7,374 5,311 7,708 - Egg Personal Loans 1,096 609 967 - Egg Mortgages 1,253 1,061 1,233 - Prudential Savings 215 270 236 - Prudential Mortgages 1,054 1,348 1,127 - Prudential Personal Loans 4 9 5 Notes:

(1) Cumulative as at the date indicated.

(2) If a customer holds more than one Egg product they are treated as a single customer for the purposes of this line item.

(3) Joint holders are treated as two or more customers.

(4) Includes second cardholders and individuals whose applications have been accepted in principle and who have been allocated a credit limit but for whom the application process has not yet been completed.

Egg plc

Egg UK

Customers

The Egg customer base grew by a further 165,000 during the first quarter. It is pleasing

to note that our card offer is still proving attractive to customers two years after we

introduced 0% on balance transfers and given the number of imitation offers now

available.

Unsecured Lending

The UK credit card business attracted 181,000 net new customers during the quarter,

taking the total over 2 million, with card balances standing at £2.4 billion at period end.

We noted a slowdown in consumer spending in the early part of Q1 2003, especially in

areas like travel and other discretionary expenditure. March showed some recovery with

approximately £400 million growth in credit card borrowing across the UK according to

the BBA, resulting in net growth in UK credit card balances for the quarter as a whole of

£280 million. Against this industry background and taking into account our deliberate

strategy to cross sell unsecured loans, we are pleased with our increase in Egg Card

balances of £71 million for the quarter which was in line with our plans and represents a

25% market share of new lending.

Personal loan customers increased by 13,000 in the quarter with high levels of

disbursements (£213 million). This was up 84% on the equivalent Q1 result in 2002.

The loan book now exceeds £1 billion in balances.

Our focus remains on cross-selling loans to the credit card base, offering a holistic

approach to unsecured lending. In total we have seen a net growth in balances of £200

million in Q1 across cards and loans (Q1 2002: £160 million). This continues to be a

healthy growth rate with our lending strategy focused on helping customers structure

their debt in a sensible manner and bringing more of their borrowing to Egg, using their

behavioural credit scores to offer the most appropriate customers pre-approved loans.

Egg plc

Savings

Q1 saw a predicted net outflow on deposits (£334 million) reflecting the fact that the

bonus internet savings account (with £3 billion of inflows) came to the end of its life in

the quarter. This level of outflows is consistent with our plans, given seasonality, and

lower than we experienced in Q1 2002.

Other Products

Egg Mortgage completions in Q1 at £83 million were down on 2002 quarterly levels.

The product remains competitive in the standard variable rate market and continues to

win awards for value and flexibility, however we continue to take a low key approach to

the mortgage market, choosing not to compete with the wide variety of introductory

offers available to consumers.

Egg Invest is effectively in tick-over mode pending the revamp to the proposition that is

now in development and we did no marketing during the ISA season.

Egg Insure had another solid quarter and now has a customer base of 113,000.

Egg France With regard to France, we have reviewed our experience to date, in particular the

response from consumers, and have revisited the strategic analysis of the French

market as a whole. This review has reaffirmed our confidence in the opportunity to build

a valuable business in France consistent with the scale of our original ambition.

As we noted in February the business has taken off more slowly than we had

anticipated. However brand awareness and consideration are both highly encouraging,

which gives us a platform on which to build and we remain very pleased with the quality

of customers we have attracted to date.

Egg plc

The customer base in France now totals 108,000. We currently have 27,000 cards in

issue and we expect this to increase to approximately 45,000 following completion of the

extensive verification procedures that are needed to comply with French legislation.

Encouragingly, early data shows these customers to be using their card more frequently

than expected, with a usage rate of approximately 19 transactions per month.

We have successfully migrated our original card proposition from the 5% cashback-led

incentive offer at launch to a clear credit offer to consumers. We now offer a borrowing

rate of 9.9% on the card with cashback of 1% on all purchases. There is an annual fee

of €35 with an introductory offer waiving it for six months. We will be adding other new

products later this year.

Following our strategic review we now expect the total profit and loss account

investment to be in the region of €300 million and breakeven to be delivered sometime

during 2005. The majority of the additional €140 million investment in the period to

breakeven reflects increased brand and marketing expenditure and delays to revenue

generation which will lag by approximately six months from our original plans.

Egg plc

Financial Review

This section analyses Q1 2003 Group results compared to Q1 2002.

Net interest income increased to £65.3 million for the quarter (Q1 2002: £55.3 million)

resulting from the growth in retail asset balances (31 March 2003: £5.7 billion, 31 March

2002: £4.8 billion).

Other operating income increased by £11.5 million to £29.9 million primarily reflecting

fees and commissions earned from the larger credit card book (£3.0 million increase)

and commissions and profit share earned from selling creditor insurance at point of sale

on personal loans (£6.6 million increase).

Operational and administrative expenses increased by £19.7 million to £52.1 million,

mainly attributable to the £9.6 million of operational costs associated with running Egg

France and the inclusion of £5.2 million of restructuring costs.

Brand and marketing costs increased by £7.7 million to £15.5 million at Group level

mainly due to the Egg France costs of £6.5 million.

Development costs increased to £8.6 million at Group level (Q1 2002: £6.8 million) with

the Egg France development programme (£1.7 million) and the USA research (£2.0

million) being offset by a reduction in core UK development spend of £1.9 million.

Depreciation increased by £1.0 million to £6.2 million due to Egg France charge of £2.1

million offset by a £1.1 million decrease in the UK depreciation figures. The majority of

the investment needed to deliver the core systems and product infrastructure in the UK

was incurred in 1999 and 2000 and as a consequence we are now seeing a reduction in

depreciation charge as this expenditure becomes fully written off.

The charge for bad and doubtful debts at £27.9 million (Q1 2002: £18.6 million)

reflects the continuing growth in the retail asset portfolio. In particular the proportion of

unsecured lending, especially personal loans, has increased within the portfolio.

Underlying credit quality remains strong.

Egg plc

The tax charge was £2.7 million (Q1 2002: £0.9 million). This can largely be attributed

to the fact that the UK business is generating profits and no tax relief has as yet been

reflected for the losses incurred in France.

Loss attributable to ordinary shareholders after tax was £18.3 million compared to a

profit of £1.5 million for the period to 31 March 2002.

Loss per share was 2.2p compared to earnings per share of 0.2p in Q1 2002.

Total assets increased to £10.5 billion as at 31 March 2003 (31 March 2002: £8.8

billion). Debt securities grew by £0.4 billion to £4.1 billion due to the strong inflow of

savings balances since the start of Q2 2002, which created additional liquidity. In

addition retail assets grew by £0.9 billion to £5.7 billion (31 March 2002: £4.8 billion)

mainly due to the continued success of the credit card business which accounted for

£0.5 billion of the increase (31 March 2003: £2.4 billion, 31 March 2002: £1.9 billion) and

the increase in personal loans by £0.5 billion to £1.1 billion from £0.6 billion. Mortgage

balances reduced by £0.1 billion to £2.3 billion, due to the Prudential branded book

remaining in run-off.

Total liabilities increased to £10.1 billion as at 31 March 2003 (31 March 2002: £8.4

billion), largely as a result of a strong inflow of funds into customer deposit accounts (the

bonus savings account) in the second and third quarters of 2002.

Capital adequacy ratios at 31 March 2003 were 10.9% (tier 1) and 14.6% (total) (31

March 2002: 9.5% (tier1) and 12.9% (total)). Following a public securitisation of £500

million of credit card receivables in 2002, a further £500 million of assets have been

securitised in the first quarter. A credit default swap over £1.7 billion of the mortgage

book has also been transacted in Q1 replacing the previous £0.9 billion swap. These

transactions along with tight management of risk-weighted assets has resulted in

improved capital ratios which enables us to absorb the planned additional investment in

France and positions us well for future growth.

Egg plc

Independent review report by KPMG Audit Plc to Egg plc

Introduction

We have been engaged by the company to review the financial information set out on

pages 17 to 25 and we have read the other information contained in the first quarter’s

report and considered whether it contains any apparent misstatements or material

inconsistencies with the financial information.

This report is made solely to the company in accordance with the terms of our

engagement to assist the company in meeting the requirements of the Listing Rules of

the Financial Services Authority. Our review has been undertaken so that we might state

to the company those matters we are required to state to it in this report and for no other

purpose. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the company for our review work, for this report, or

for the conclusions we have reached.

Directors' responsibilities

The first quarter’s report, including the financial information contained therein, is the

responsibility of, and has been approved by, the directors. The directors are responsible

for preparing interim reports in accordance with the Listing Rules of the Financial

Services Authority which require that the accounting policies and presentation applied to

interim figures should be consistent with those applied in preparing the preceding annual

accounts except where they are to be changed in the next annual accounts in which

case any changes, and the reasons for them, are to be disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4:

Review of interim financial information issued by the Auditing Practices Board for use in

the United Kingdom. A review consists principally of making enquiries of Egg plc

Egg plc

management and applying analytical procedures to the financial information and

underlying financial data and, based thereon, assessing whether the accounting policies

and presentation have been consistently applied unless otherwise disclosed. A review is

substantially less in scope than an audit performed in accordance with Auditing

Standards and therefore provides a lower level of assurance than an audit. Accordingly

we do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that should be

made to the financial information as presented for the three months ended 31 March

2003.

KPMG Audit Plc

Chartered Accountants

23 April 2003

London

Egg plc

Consolidated profit and loss account (Unaudited)

Three months to 31 March

2003£m


2002 £m

(Audited) Full year

2002£m

Interest receivable 202.7 136.7 664.7Interest payable (137.4) (81.4) (440.8)

Net interest income 65.3 55.3 223.9Other operating income 29.9 18.4 103.4

Operating income 95.2 73.7 327.3Administrative expenses - operational and administrative expenses (52.1) (32.4) (158.9) - brand and marketing costs (15.5) (7.8) (48.6) - development costs (8.6) (6.8) (26.1)Depreciation and amortisation (6.2) (5.2) (21.7)Amounts written off fixed asset investment - - (3.1)Provisions for bad and doubtful debts (27.9) (18.6) (85.4)

Operating (loss)/profit (15.1) 2.9 (16.5)Share of operating loss of joint ventures (0.1) - (0.1)Share of Associates losses (0.5) (0.5) (3.5)Profit on partial disposal of continuing operation - - 3.5

(Loss)/profit on ordinary activities before tax (15.7) 2.4 (16.6)Tax charge on (loss)/profit on ordinary activities (2.7) (0.9) (2.2)Minority interests 0.1 - -

Retained (loss)/profit for the financial period (18.3) 1.5 (18.8)

Basic and diluted (loss)/earnings per share (pence per share)

(2.2p) 0.2p (2.3p)

All of the Group’s losses arose from continuing operations.

Egg plc

Consolidated statement of total recognised gains and losses

Three Months to

March 2003

£m

Three Months to

March 2002

£m

(Audited)Full Year

2002 £m

Retained loss for the financial period (18.3) 1.5 (18.8)Currency translation differences on foreign currency net investments

3.9 - 0.7

Total recognised losses related to the period

(14.4) 1.5 (18.1)

Egg plc

Consolidated balance sheet (Unaudited)

31 March 2003

£m

31 March 2002

£m

(Audited)31 December

2002 £m

Assets Cash and balances at central banks 13.3 9.1 13.0Loans and advances to banks 253.1 52.0 238.6Securities purchased under agreement to resell

75.0 - 150.0

Loans and advances to customers 5,692.9 4,846.3 5,546.3Debt securities 4,127.2 3,687.3 4,267.6Shares in joint ventures 0.7 0.9 0.8Investment in associated undertakings 6.9 10.1 7.4Intangible fixed assets 6.5 2.0 6.7Tangible fixed assets 78.4 51.5 74.1Own shares 2.2 2.2 2.2Deferred tax 19.4 14.8 18.5Other assets 152.2 64.7 164.1Prepayments and accrued income 76.0 110.5 76.1

Total assets 10,503.8 8,851.4 10,565.4

Liabilities

Deposits by banks 1,050.4 85.5 501.0Securities sold under agreements to repurchase

- 926.7 -

Customer accounts 7,672.3 5,580.8 8,016.4Debt securities issued 719.5 1,418.2 1,014.9Other liabilities 271.1 152.4 223.1Accruals and deferred income 141.3 85.9 146.6Subordinated liabilities - Dated loan capital 201.7 123.6 201.7

Total liabilities 10,056.3 8,373.1 10,103.7

Egg plc

31 March 2003

£m

31 March 2002

£m

(Audited)31 December

2002 £m

Shareholders’ funds

Called up share capital 410.1 409.6 410.1Share premium account 107.3 106.3 107.3Capital reserve 359.7 359.7 359.7Profit and loss account (430.9) (397.3) (416.9)

Shareholders’ funds (all attributable to equity interests)

446.2 478.3 460.2

Minority interests (equity) 1.3 - 1.5

Total liabilities and shareholders’ funds 10,503.8 8,851.4 10,565.4

Egg plc

Consolidated Cash Flow (Unaudited) Three

months to 31 March

2003£m


2002 £m

(Audited)Full year

2002£m

Net cash (outflow)/inflow from operating activities

(169.0) 621.7 1,298.1

Return on investments and servicing of finance

(3.4) (2.1) (11.2)

Taxation: Tax (paid)/group relief received (0.3) 5.8 12.5Capital expenditure and financial investment:

Purchase of tangible fixed assets (11.1) (1.7) (31.6)Sale of tangible fixed assets 0.1 - 0.1Restricted share plan purchase of shares (0.9) - (2.7)Purchase of investments (1,526.9) (785.7) (6,154.3)Sale of investments 1,695.7 170.1 5,028.6

Net cash inflow/(outflow) from capital expenditure and investment

156.9 (617.3) (1,159.9)

Acquisition and disposals

- Purchase of subsidiary - (2.9) (28.4)- Purchase of associated undertaking - (1.1) (1.2)

Net cash outflow from acquisitions and disposals

- (4.0) (29.6)

Financing: Subsidiary share issue - - 5.0Issue of dated loan capital - - 78.1Issue of share capital - 0.1 1.6

Net cash inflow from financing - 0.1 84.7

(Decrease)/increase in net cash (15.8) 4.2 194.6

Egg plc

Reconciliation of loss before tax to net operating cash flows (Unaudited)


2003£m

Three months to 31 March 2002

£m

(Audited)Full year

2002£m

Operating (loss)/profit (15.1) 2.9 (16.5)Decrease/(increase) in prepayments and accrued income

0.1 (35.9) 0.5

(Decrease)/increase in accruals and deferred income

(5.3) (41.2) 18.0

Provision for bad and doubtful debts 11.8 10.6 45.2Profit on sale of financial investment (2.5) - (9.1)Depreciation and amortisation 9.7 11.4 41.6Interest on subordinated liabilities 3.4 2.1 11.2Net increase in loans and advances to banks and customers

(189.0) (124.5) (836.9)

Net decrease/(increase) in securities sold under agreements to resell

75.0 - (150.0)

Net decrease in deposits by banks and customer accounts

205.3 (283.0) 2,411.3

Net increase/(decrease) in securities sold under agreements to repurchase

- 542.5 (384.2)

Net (decrease)/increase in debt securities in issue

(295.4) 503.2 99.9

Net increase in other assets (15.5) (10.2) (36.9)Net increase in other liabilities 71.1 43.9 74.4Net (decrease)/increase in settlement balances

(26.5) (0.1) 28.9

Other non-cash movements 3.9 - 0.7

Net cash (outflow)/inflow from operating activities

(169.0) 621.7 1,298.1

Egg plc

Reconciliation of movement in shareholders’ funds (Unaudited)


2003£m


2002 £m

(Audited)Full year

2002£m

Retained profit/(loss) for the financial period

(18.3) 1.5 (18.8)

Exchange and other adjustments 3.9 0.7Increase in share capital - - 0.5Share premium - 0.1 1.1Awards under incentives schemes 0.4 0.8 0.8

Net increase/(decrease) in shareholders’ funds

(14.0) 2.4 (15.7)

Opening shareholders’ funds 460.2 475.9 475.9Closing shareholders’ funds 446.2 478.3 460.2

Notes on financial information a) The financial information has been prepared on the basis of the accounting policies

set out on pages 53 to 55 of the Egg plc Annual Report and Accounts for the year ended 31 December 2002 and are unchanged for the period to 31 March 2003.

b) The comparative figures for the financial year ended 31 December 2002 are not the

company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

c) Group operating (loss)/profit is stated after charging provisions for bad and doubtful

debts of £27.9 million (31 March 2002 - £18.6 million). The balance sheet provisions for bad and doubtful debts and movements thereon were:

Egg plc

General Specific Total

£m £m £m

Balance at 1 January 2003 36.1 92.6 128.7Exchange adjustment on opening balances

-

0.1

0.1

Amounts written off - (16.0) (16.0)New and additional provisions 1.9 26.0 27.9Net charge against profit and loss 1.9 26.0 27.9Balance at 31 March 2003 38.0 102.7 140.7Balance at 31 March 2002 29.0 62.4 91.4 Provisions at 31 March 2003 were 2.41% of advances to customers (31 March 2002: 1.89%).

d) The taxation charge assumes a UK corporation tax rate of 30% (2002: 30%) and comprises:

Three

months to 31

March 2003


2002

£m £mCorporation tax payable (2.7) (0.9)

e) Basic loss per share of 2.2p (31 March 2002: earnings per share of 0.2p) are

calculated by dividing the loss after tax for the financial period of £18.3 million (31 March 2002: £1.5 million profit after tax) by the weighted average of 814.7 million (31 March 2002: 813.4 million) ordinary shares in issue during the period. Fully diluted loss per share of 2.2p (31 March 2002: fully diluted earnings per share of 0.2p) is calculated by dividing the loss after tax for the financial period of £18.3 million (31 March 2002: £1.5 million profit after tax) by the weighted average of 814.8 million (31 March 2002: 814.8 million) ordinary shares and options in issue during the period.

Egg plc

f) Egg’s share of the gross assets and liabilities in respect of joint venture undertakings

are as follows: March

2003March 2002

£million £millionGross assets 3.0 3.1Gross liabilities (2.3) (2.2)Shares in joint ventures 0.7 0.9

Egg plc

Average Balance Sheet (UK Business Only)

(£m, except percentages) Three months ended

31 March 2003

Three months ended 31 March 2002

Year ended 31 December

2002 Avg.

Balance Avg.

Rate % Avg.

Balance Avg.

Rate % Avg.

Balance Avg.

Rate % Assets Wholesale assets 4,371 4.26 3,394 5.09 4,111 4.68Mortgages 2,336 4.86 2,415 5.10 2,392 5.00Personal loans 1,043 8.75 609 9.64 722 9.59Credit cards 2,370 9.92 1,856 8.27 2,081 8.99Total average interest-earning assets

10,120 6.19 8,274 6.14 9,306 6.10

Fixed and other assets 114 146 134Total assets 10,234 8,420 9,440Liabilities Customer accounts 7,744 3.49 5,714 3.45 7,069 3.77Wholesale liabilities and subordinated debt

1,811 5.44 1,918 4.70 1,703 4.60

Total average interest-bearing liabilities

9,555 3.86 7,632 3.70 8,772 3.93

Other liabilities 214 311 188Total liabilities 9,769 7,943 8,960Shareholders’ funds 465 477 480Total liabilities and shareholders funds

10,234 8,420 9,440

Note: The above analysis represents interest earned or borne on on-balance sheet

assets and liabilities only.

Egg plc

Average Yields (UK Business Only)

Three months

ended 31 March 2003

Three months

ended 31 March 2002

Year ended 31

December 2002

Average rate %

Average rate %

Average rate %

Interest income as a percentage of average interest-earning assets

6.19 6.14 6.10

Interest expense as a percentage of average interest-bearing liabilities

3.86 3.70 3.93

Interest spread 2.33 2.44 2.17 Net interest margin 2.54 2.67 2.40

ends

For further information:

Media:

Egg Press Office (main number) 020 7526 2600

Emma Byrne: 020 7526 2565 / mobile: 07775 657 241

Analysts / Investors:

Kieran Coleman 020 7526 2648 / mobile: 07711 717 358

Egg plc

Notes to Editors:

1. Egg plc is the world’s largest online bank, providing financial services products through its Internet site and other distribution channels.

2. Egg plc floated on 12 June 2000 raising proceeds of approximately £150 million and is listed on the London Stock Exchange. Prudential plc continues to hold 79% of the share capital.

egg plc q1 financial results and new business figures/media/files/p/prudential-v3/results... · q1...

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